Opinion
Civil Action No. 03-10185-RGS.
February 4, 2005
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
On January 29, 2003, M-Yachts, Inc., filed this breach of contract case against a former licensee, FastBoatWorks, Inc., seeking $114,000 in payments that it alleges are owed under certain Licensing Agreements. M-Yachts is the owner of a patent for the design of an MX-Ray Sailboat incorporating a novel spinnaker system (United States Patent No. 5,937,779). On April 30, 2000, M-Yachts gave FastBoatWorks an exclusive license to manufacture and sell MX-Ray Sailboats in North America, Central America, and South America (the Licensing Agreement). On March 19, 2001, the parties entered into an Amendment to the Licensing Agreement granting FastBoatWorks additional licensing rights in New Zealand (collectively, the Licensing Agreements).
In the Complaint, M-Yachts also seeks redress under Chapter 93A and, in its prayer for relief, an accounting.
After service of process was perfected on September 16, 2003, FastBoatWorks answered the Complaint and filed a counterclaim alleging: (1) that M-Yachts has failed to reclaim various yacht molds and plugs which FastBoatWorks' has been forced to store on its property; and (2) that M-Yachts has failed to account for the profits on the sale of a book on sailing in which FastBoatWorks had purchased a one-quarter interest. On February 5, 2004, the court issued a writ of attachment for $100,000 real estate owned by FastBoatWorks in Massachusetts. After the parties failed in their efforts to settle the case, on September 27, 2004, M-Yachts filed a motion for summary judgment seeking $100,000 in contract damages. FastBoatWorks opposed the motion, contesting the amount due on grounds that the Licensing Agreements were prematurely terminated. FastBoatWorks does not, however, deny that it has failed to make the scheduled payments under the Licensing Agreements. On October 17, 2004, FastBoatWorks filed a cross-motion for summary judgment arguing, inter alia, that the court lacks personal jurisdiction.
FastBoatWorks seeks either the removal of M-Yachts molds and plugs or payment for the reasonable costs of storage. FastBoatWorks also demands an accounting of the book sales.
Payments were to be made on a yearly basis.
As a rule, a court will determine whether jurisdiction exists before reaching the merits of a dispute. Steel Co. v. Citizens for a Better Env't., 523 U.S. 83, 88-89 (1998). FastBoatWorks makes two arguments. First, it contends that because M-Yachts dissolved as a corporation before filing this lawsuit, it "was not a legal person at the inception . . . capable [of] fil[ing] and maintain[ing] a Civil Action . . . and [consequently] there exists no diversity of citizenship . . . between the litigants." Defendant's Motion, at 1. FastBoatWorks points to M-Yachts' September 7, 2002 Articles of Dissolution, which were adopted by the Secretary of State for the Commonwealth of Massachusetts, effective December 31, 2002.
In response, M-Yachts directs the court to G.L. c. 156B § 102, which provides:
[e]very corporation whose corporate existence for other purposes is terminated (1) by dissolution under the provisions of section ninety-nine, one hundred, or one hundred and one, (2) by the expiration of the period for its duration limited by its articles of organization, or (3) in any other manner, shall nevertheless be continued as a body corporate for three years after the time when its existence is terminated, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs. . . .
Because the Complaint was filed on January 29, 2003, one month after M-Yachts' dissolution on December 31, 2002, the action falls well within the statutory winding up period.
FastBoatWorks' second jurisdictional argument is equally without merit. FastBoatWorks maintains that because it was qualified by the Secretary of State on July 19, 2000, "to do business in the Commonwealth of Massachusetts," it is, in essence, "a legally existing Massachusetts corporation" and therefore diversity of citizenship is lacking. (M-Yachts is incorporated in Massachusetts). Defendant's Memorandum, at 3. FastBoatWorks' certificate, however, specifically states that FastBoatWorks is "a corporation organized under the laws of New Jersey." Moreover, in filing with the Secretary of State, FastBoatWorks identified its principal place of business as 9060 Palisade Ave, North Bergen, New Jersey. FastBoatWorks confuses the right to do business in Massachusetts with the legal status accorded a corporation organized under Massachusetts law or one that conducts its business operations in and from Massachusetts. Under 28 U.S.C. § 1332(c)(1). "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." Because FastBoatWorks qualifies under neither leg of the statute, diversity of citizenship exists, and FastBoatWorks' motion for summary judgment on jurisdictional grounds will be DENIED.
The statute under which FastBoatWorks registered, G.L. c. 181, § 4, applies to foreign corporations doing business in the Commonwealth. (Emphasis added).
While it is open to a corporation to argue that its "principal office" is different from its "principal place of business" under either the nerve center test or the locus of operations test set out in Topp v. CompAir. Inc., 814 F.2d 830, 834 (1st Cir. 1987), FastBoatWorks has not done so (even though it owns property in Massachusetts for some unidentified business purpose).
M-Yachts' motion for summary judgment seeks a ruling that FastBoatWorks breached the Licensing Agreements by failing to make the scheduled payments. M-Yachts contends that as a result FastBoatWorks owes it at least $100,000 in unpaid licensing fees. FastBoatWorks does not dispute M-Yachts' performance under the Licensing Agreements or its failure to make the payments. Instead, it contests the date on which the Licensing Agreements were terminated. The undisputed facts are these.
On April 30, 2000, M-Yachts and FastBoatWorks entered into the following Licensing Agreement:
This AGREEMENT (the "Agreement") is made . . . by and between M-Yachts, Inc. ("M-Yachts"), a Massachusetts corporation with a principal office at 83 Boston Post Road, Sudbury, Massachusetts and FastBoatWorks, Inc. ("Licensee") a corporation with principal offices
at 9060 Palisade Avenue, North Bergen, New Jersey, 07047.
1. Grant of License. Subject to all of the terms, conditions and provisions of this Agreement, M-Yachts does hereby grant to Licensee the non-transferable right, privilege and license (the "License"), which shall be exclusive except as otherwise hereinafter provided, to manufacture, produce, ship and sell the MX-Ray and to distribute such MX-Rays . . . only within the Continental North America, South America, Central America . . . (the "Territory").
2. Term. Provided that the terms, conditions and provisions of this Agreement are complied with, this License shall be for a period of years with a commencing date and an expiring date as designated on Exhibit "A" herewith annexed and made a part hereof. . . .
3.(a) Earned Fees for MX-Ray: For each MX-Ray built under this License Agreement by Licensee, Licensee shall pay to M-Yachts, three hundred ($300.00) dollars or six percent (6%) of the current retail price, whichever is greater with an annual minimum ("Annual Minimum"). Fees will be rounded down to the nearest one (1) dollar.
In the First License Year of this agreement, the Annual Minimum due under the above paragraph 3(a) shall be fifteen thousand ($15,000.00) dollars. In the Second License Year of this agreement, the Annual Minimum due under the above paragraph 3(a) shall be thirty thousand ($30,000.00) dollars. In every License Year thereafter until the end of the term of the lease or its otherwise termination, the Annual Minimum due under the above paragraph 3(a) shall be forty-five thousand ($45,000.00) dollars.
While the Agreement uses an idiosyncratic spelling of FastBoatWorks' name, the court has used the spelling employed by the parties in their briefs.
Neither party has been able to produce a copy of Exhibit A.
. . .
4(a). Payments for MX-Ray: The amount of Earned Fee, as determined above in section 3(a) of this Agreement shall be determined at the end of each month during each License Year and any Earned Fee applicable to such month shall be due and payable by Licensee to M-Yachts within thirty (30) days after the end of such month. At the end of each License Year, in the event the Annual Minimum fee due, as defined above in paragraph 3(a), has not been paid, such sum shall be due and payable by Licensee to M-Yachts within thirty (30) days after the end of such License Year.
. . .
5. License Fees. For the actual grant of this license, Licensee shall pay to M-Yachts Thirty-Five thousand ($35,000.00) dollars. Of this sum, Ten Thousand ($10,000.00) dollars shall be due and payable upon the execution of this Agreement. The remaining fee due under this paragraph shall be due and payable by Licensee to M-Yachts on the 30th of the following month and continuing each month thereafter in equal monthly installments of one thousand ($1,000.00) dollars.
. . .
13. Default. In the event that (a) there be any default or breach by Licensee of any obligation or responsibility to be performed or which has been assumed by Licensee hereunder, including particularly (but without limitation) the payment of any sum at any time due hereunder by Licensee to M-Yachts, and any such default or breach is not cured by Licensee within ten (10) days after the sending by M-Yachts to Licensee of a written notice specifying the default or breach, . . . then M-Yachts shall have the right to terminate this Agreement, effective upon the giving of notice to that effect, and thereupon this Agreement shall be deemed to have been terminated without, however, in any manner affecting the obligations of Licensee to pay to M-Yachts amounts due or becoming due under this Agreement, and without, otherwise, affecting, in any manner whatsoever the other provisions of this Agreement relating to paragraphs 3(a), 3(b), 4(a), 4(b), 5, 6, 7, 9, 10, 11, and 12 above.
On March 19, 2001, the parties amended the Licensing Agreement to include New Zealand. In exchange, FastBoatWorks promised to "pay M-Yachts US $10,000 before April 10, 2001, and additional monthly License/mold fee in amount of US $500" to and including April of 2002 (that is, a total of $6,000).
On September 14, 2002, M-Yachts mailed FastBoatWorks a Notice of Default and a Demand Letter stating that because FastBoatWorks had failed to account for the number of sailboats that it had built and sold and because it had failed to pay the licensing fees, the Licensing Agreements would be terminated if a satisfactory response was not received within ten days. On September 29, 2002, M-Yachts sent a Notice to Terminate abrogating the Licensing Agreements effective September 30, 2002.
FastBoatWorks, however, argues that M-Yachts had terminated the Agreements on October 29, 2001, when its president, Vlad Murnikov sent the following e-mail to the President of FastBoatWorks, Gene Hirschel.
Gene,
I became aware that you have recently built and shipped few MX-Rays. If you are still in business and intend to continue building boats, you should do it properly, with appropriate technical supervision, quality control and customer service. And of course with license fees paid to M-Yachts. Otherwise, you should stop production immediately. You are in a breach of the License Agreement for a long time. This is the final note.
You have ten (10) days until November 9, 2001 to take necessary measures to ensure that the boats are built right, customers questions and inquiries are answered timely, and your debt to M-Yachts has been taken care of. If this is not done, License Agreement to build MX-Ray is considered terminated and I will consult our attorneys to take appropriate actions.
FastBoatWorks did not respond.
Where the terms of a contract are unambiguous, as is the case here, matters of contract interpretation are issues of law for the court.Compagnie de Reassurance d'Ile de France v. New England Reinsurance Corp., 57 F.3d 56, 75 (1st Cir. 1995) (applying Massachusetts law). Under the plain terms of the Licensing Agreements, FastBoatWorks owed M-Yachts the full $35,000 Licensing Fee referenced in § 5 of the Licensing Agreement regardless of the date the contract was terminated because § 5 states that the $35,000 fee is "[f]or the actual grant of this license." Similarly, under the terms of the Amendment to the Licensing Agreement FastBoatWorks owed M-Yachts $16,000 for the extension of the agreement to New Zealand. It is equally clear that FastBoatWorks also owed M-Yachts the Annual Minimum first year lump sum payment of $15,000 as provided in § 3(a).
Section 5 anticipated that there would be an initial payment of $10,000 and then subsequent payments of $1,000 until the entire $15,000 fee was paid.
While § 3(a) provides for an alternative payment of $300 for each boat sold, M-Yachts has not elected to seek an accounting of FastBoatWorks' total boat sales.
Because I find that Murnikov's October 29, 2001 e-mail served to terminate the Licensing Agreements effective that date, M-Yachts is entitled only to a prorated share ($15,000) for the six months of the second year that the Licensing Agreements remained in effect. Consequently, FastBoatWorks owes M-Yachts $81,000 under the Licensing Agreements and M-Yachts motion for summary judgment will be ALLOWED in that amount.
The Licensing Agreements do not contain an acceleration clause, and M-Yachts properly conceded at oral argument that if the court finds that the termination date was October 29, 2001, it has no claim involving the third year fees.
ORDER
For the foregoing reasons, FastBoatWorks' motion for summary judgment is DENIED. M-Yachts' motion for summary judgment is ALLOWED as to FastBoatWorks' breach of its contractual obligations under the Licensing Agreements. M-Yachts is awarded damages in the amount of $81,000 with interest. The Clerk will enter judgment accordingly upon M-Yachts' submission of a final calculation of damages consistent with the instructions of this Order. The court will DISMISS M-Yacht's claim under G.L. c. 93A. See Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 100-101 (1979). The court will grant FastBoatWorks' request for an accounting of profits earned on the sailing book. M-Yachts will provide such an accounting within forty-five (45) days of the date of this Order. FastBoatWorks will also be awarded a $250 monthly storage fee from the date its counterclaim was filed (September 16, 2003) demanding the removal of the molds and plugs from its property. M-Yachts will make arrangements to remove the molds and plugs from FastBoatWorks' property with in thirty (30) days of the date of this Order. Any book profits owed to FastBoatWorks and the cumulative storage fee will be applied as an offset to the award of damages to M-Yachts. As the prevailing party, M-Yachts shall submit the final damage award figure to the Clerk within forty-five (45) days of the date of this Order so that a final judgment may be entered.
The Clerk will calculate prejudgment interest from October 29, 2001, the date of the demand. See G.L. c. 231, § 6c; O'Malley v. O'Malley, 419 Mass. 377, 381 (1995).
SO ORDERED.